Being denied for a credit card is never a good feeling. I remember back when I was a college student and was so excited to apply for credit cards, and then ended up being disappointed when I’d get rejected for cards. I took it personally, not to mention that it’s not fun to miss out on great credit card offers.
Fortunately nowadays I rarely get denied for credit cards, even though I have over two dozen credit cards. That’s thanks to the fact that I have a more established credit history, and also understand how actions impact my credit score, from opening card accounts to closing card accounts.
Readers often present me with situations and ask what I think their odds of approval for a particular card are. While I’m happy to give my best guess, perhaps the biggest question should be whether it actually matters. What’s the real impact on your credit score when you’re denied for a credit card?
In this post:
How are credit scores calculated?
For some context, first let me post a quick refresher of how your credit score is calculated (if you already know this, by all means skip this section). Your credit score is made up of the following components:
- 35% of your score is your payment history (whether you pay on-time)
- 30% of your score is your credit utilization (how much credit you’re using compared to your total limits)
- 15% of your score is your credit age (the average age of your credit accounts)
- 10% of your score is the types of credit you use (how many different types of requests for credit you have)
- 10% of your score is your requests for new credit (how many times you’ve made requests for credit, including credit cards)
Your takeaway here should be that if you make your payments on-time, don’t utilize too much of your credit, and keep your average account age fairly old, that’s 80% of your credit score right there. That’s what should matter most.
How is your credit impacted when applying for a credit card?
The only immediate impact on your credit score of applying for a credit card is that there’s a new inquiry on your credit report. 10% of your credit score is made up of your requests for new credit, so this is the aspect of your credit score that would be impacted by a credit card application.
Generally speaking, you can expect that on average your score will be dinged by two to three points for every inquiry. However:
- Given that your credit score is on a scale of 300-850, two to three points really shouldn’t matter for most consumers
- Everyone’s credit score will work differently, so some people may be impacted by an inquiry more than others, based on how many total factors there are at play
- There are potentially really positive impacts to applying for credit cards, assuming you get approved — having a new card can increase your available credit, and can contribute to on-time card payments
- An inquiry falls off your credit report after 24 months (and in reality any drop in score may be undone long before that)
What happens to your credit score if you’re denied for a card?
Applying for a credit card results in an inquiry on your credit score, but does the impact of that differ depending on whether you’re approved or denied? Well, the good news is that there’s no real “penalty” for being denied for a card.
It’s not like the card issuer puts a note on your credit report that you’re not credit-worthy, or anything. Rather the credit report just reflects the inquiry, but doesn’t show the account having been opened, and that’s not a big deal at all.
That would be no different than if you applied for a card, were approved, and then decided you didn’t want the card. So the good news is that you can be denied for quite a few cards over your lifetime, and it shouldn’t have a major negative impact on your credit score.
Should you just apply for cards and see what happens?
As I mentioned above, the context for all of this is that I’m often asked by readers what I think their approval odds are for a particular card. My advice is generally to not be overly-cautious when applying for cards, but also don’t apply recklessly.
The way I view it:
- Check your credit score before applying for cards to get a sense of where you stand
- If you are going to apply for a card and get denied, try to learn from that; in other words, if you’re denied for a Chase cards, don’t just apply for six other Chase cards right after, thinking you might get approved for one, but rather change something about your behavior as a consumer, and then try again
- Personally my credit score is around 830, and I tend to think that anything above 740 is sort of “wasted,” in the sense that anyone with a score in that range should get approved for cards, get the best financing rates, etc.; based on that I’m also more likely to apply for cards
While getting rejected for anything in life isn’t fun, the good news is that getting denied for a credit card isn’t nearly as bad as you may assume. The only thing that really happens is that an inquiry shows on your credit report, and that could temporarily ding your score a few points. Unless you’re right at the cusp of having an excellent credit score, the impact of that should be negligible.
In general I encourage people with excellent credit to apply for cards even if they’re not sure they’ll get approved, though be realistic and smart about it. If you’re straight out of school, start with an Amex card rather than a Chase card. If your credit score isn’t amazing, maybe be a little more conservative than if you have an excellent credit score.
Hopefully this answers questions many may have about being denied for credit cards.